Energy Prospectus

Investing.com - Oil was steady Monday after gains of over 5% last week after stable Chinese growth and U.S. rig count data.
U.S. crude was up 1 cent, or 0.02%, at $46.55 at 08:00 ET. Brent added 11 cents, or 0.22%, to $49.02.
Chinese second-quarter GDP growth came in at 6.9%, beating estimates, with refinery activity remaining buoyant.
Baker Hughes Friday reported a rise in the U.S. oil rig count data in the latest week of two to 765, the highest level since April 2015.
However, recent data suggest the pace of growth in U.S. drilling activity is slowing.
Key OPEC producers are due to meet later this month to discuss the current market situation.
OPEC and non-OPEC producers have agreed to curb output by 1.8 million barrels a day through to March.

The U.S. accounts for more than 40% of the total amount of commercial crude and product stocks among OECD nations, meaning it has a great deal of influence on supply. But American inventories wield influence beyond their already large size. Unlike most countries, the EIA reports U.S. crude inventories weekly, giving investors more data on supply and demand.

As I pointed out in my July 14th podcast, what EIA reports each week is just an estimate. This is especially true for U.S. oil production.

Here is what Saudi Arabia is doing to impact U.S. oil inventories:
You should all read this: http://www.oilandgas360.com/official-sa ... il-prices/

If we continue to see big draws from U.S. oil in storage (~13 million bbl drop in the last two weeks), it will push oil prices higher.

U.S. active rig count growth has slowed: http://www.oilandgas360.com/u-s-rig-cou ... a-adds-16/

$45 oil caused a lot of companies to slow their drilling programs.

Comments from John White on July 17:

On 7/13/2017 the IEA released its Monthly Oil Market report. Global oil supply rose by 720,000 b/d in June to 97.46 million b/d as producers opened the taps. Output stood 1.2 million b/d above a year ago with non-OPEC firmly back in growth mode. Non-OPEC production is expected to expand by 0.7 million b/d in 2017 and 1.4 million b/d in 2018.

OPEC crude output rose by 340,000 b/d in June to 32.6 million b/d after Saudi flows increased and Libya and Nigeria, spared from the OPEC cuts, pumped at stronger rates. OPEC compliance slumped to 78%, the lowest rate this year, and was overtaken by the non-OPEC group whose rate improved to 82%.

For global demand, after lackluster 1.0 million b/d growth in 1Q 2017, there was a dramatic acceleration in 2Q 2017 to 1.5 million b/d. For 2017 as a whole, demand is forecast to reach 98.0 million b/d, with growth revised up by 0.1 million b/d compared to last month's report to 1.4 million b/d. The IEA sees further growth of 1.4 million b/d for 2018, with global demand reaching 99.4 million b/d. [ My SWAG is that demand will be even higher in Q3. - Dan]

The IEA estimates OECD industry inventories fell in May by 6.0 million barrels on lower imports of crude and products. Inventories are now 266 million barrels above the five-year average, down from 300 million barrels in April. Preliminary data show a moderate reduction in OECD stocks for June.

Each month, the IEA noted, something seems to come along to raise doubts about the pace of the re-balancing process. This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement.

On 7/11/2017, Reuters reported that Halliburton's (HAL-NC) business development head said the U.S. shale drilling boom is likely to ease next year as demand on the industry's service sector is unsustainable. The number of rigs drilling for oil in the United States rose to 763 last week, the highest in more than two years, showing that despite oil trading below $50 a barrel, shale oil explorers are still ramping up activity. Halliburton's Mark Richard, Senior Vice President for global business development and marketing, sees that count rising above 1,000 by the end of the year, but not beyond that. [As I noted in my podcast, we are now past the "rebound phase" of this cycle. Production growth ALWAYS slows after the rebound phase because the oilfield service and midstream companies cannot keep up. - Dan]

"I think it might level off then. If our customers put too much out there, it's costing too much and putting too much demand on service companies to provide equipment and people," he told Reuters at an industry event in Istanbul. "We hit the bottom in the first half of this year. Our customers are getting excited about things but we don't yet see a lot of activity increasing."